Fixed costs change depending on the volume of production. True or False?

Fixed costs change depending on the volume of production. True or False?

• A. True
• B. False
• C. Sometimes
• D. Not at all

Answer: (D)

Fixed costs do not vary with production volume; they stay constant within the relevant range. The statement that fixed costs change as output changes isn’t correct, because those costs are incurred regardless of how much you produce. That’s why the best answer expresses that fixed costs don’t change at all with output. For example, rent, salaries of permanent staff, and insurance typically remain the same whether you produce a little or a lot. (Note: in some cases, step costs can change at certain production thresholds, but within a given period they’re considered constant.)

Fixed costs do not vary with production volume; they stay constant within the relevant range. The statement that fixed costs change as output changes isn’t correct, because those costs are incurred regardless of how much you produce. That’s why the best answer expresses that fixed costs don’t change at all with output. For example, rent, salaries of permanent staff, and insurance typically remain the same whether you produce a little or a lot. (Note: in some cases, step costs can change at certain production thresholds, but within a given period they’re considered constant.)